Tuesday, November 16, 1999
Greenspan: Cooperation key in new marketplace
BY MARCY GORDON
The Associated Press
WASHINGTON — Financial regulators with differing turfs will have to cooperate more now that a new law is in place eliminating barriers between banks, investment firms and insurance companies, Federal Reserve Chairman Alan Greenspan said Monday.
He said the law, signed Friday by President Clinton, will benefit consumers by spurring competition that will give them more choices. Mr. Greenspan has long supported such an overhaul, which tears down De pression-era legal prohibitions and allows banks, securities firms and insurers to merge and sell each other's products.
“It is clear that the consumer will benefit from the wider permissible scope of activities by, and the more equal competition among, financial entities,” he said in a speech to an insurance industry group. “Management now will be given greatly enhanced flexibility to determine the best way to deliver its services to the market place, and the market will judge the correctness of that choice.”
But the central bank chief also warned that financial regulators must be especially alert to deal with problems created by newly overlapping jurisdictions. He conceded there will be an adjustment period as regulators learn to administer the new law.
“There will understandably be some tensions as we all move up the learning curve,” Mr. Greenspan told the American Council of Life Insurance's annual meeting.
One example of the overlapping jurisdiction is oversight of banks, which is divided among several sometimes-competitive federal and state agencies. The Federal Reserve, independent from the administration, oversees bank-holding companies.
The Treasury Department, meanwhile, is responsible for nationally chartered banks through the U.S. comptroller of the currency.
Then there's the Office of
Thrift Supervision, another arm of Treasury, which regulates savings and loans. The Federal Deposit Insurance Corp. administers the bank insurance fund, and the National Credit Union Administration oversees federally chartered credit unions. In addition, each state has a banking commissioner to oversee state-chartered banks, thrifts and credit unions.
The Securities and Exchange Commission is the watchdog agency for Wall Street and the securities industry. In addition, state regulators oversee brokers and investment firms operating within their borders.
Each state has insurance commissioners, but there is no federal regulator of the industry.
The system — designed to keep a healthy balance among financial regulators — has sometimes spawned turf fights. The Fed-Treasury rivalry has been especially fierce regarding financial overhaul legislation. That changed Oct. 14 when the agencies agreed to share power over banks that expand into the securities and insurance businesses.
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